Venus Corp.'s worksheet for calculating current and deferred income taxes for 1992 follows:

                                      1992 1993 1994

Pretax income $1,400

Temporary differences:

Depreciation                    (800) (1,200) $2,000

Warranty costs         & nbsp;     400   (100)    (300)

Taxable income               $1,000 (1,300) 1,700

Loss carryback        &nb sp;    (1,000) 1,000

Loss carryforward              300   (300)

                                          $ 0   $ 0       $1,400

Enacted rate 30% 30% 25%

Venus elected early adoption of FASB Statement No. 109, Accounting for Income Taxes. Venus had no

prior deferred tax balances. In its 1992 income statement, what amount should Venus report as:

Deferred income tax expense?

a. $350

b. $300

c. $120

d. $95

Choice "d" is correct, $95 deferred income tax expense (see calculations below). The tax rate used to

compute the DTA, or DTA should be the enacted tax rate for the year the temporary difference is

expected to reverse.

1992

Deferred tax liability =

800 x .25 = 200 (25% used because this is the enacted

tax rate for 1994)

Deferred tax asset =

100 x .30 = 30 (30% used because this is the enacted

For calendar year 1989, Clark Corp. reported depreciation of $300,000 in its income statement. On its

1989 income tax return, Clark reported depreciation of $500,000. Clark's income statement also included

$50,000 accrued warranty expense that will be deducted for tax purposes when paid. Clark elected early

application of FASB Statement No. 109, Accounting for Income Taxes, in its financial statements for the

year ended December 31, 1989. Clark's enacted tax rates are 30% for 1989 and 1990, and 25% for 1991

and 1992. The depreciation difference and warranty expense will reverse over the next three years as

follows:

1990 $ 80,000 $10,000

1991 70,000 15,000

1992 50,000 25,000

$200,000 $50,000

These were Clark's only temporary differences. In Clark's 1989 income statement, the deferred portion of

its provision for income taxes should be:

a. $67,000

b. $45,000

c. $41,000

d. $37,500